Watch out for high natural gas and electricity bills this summer. In my new
job I analyze lots of things as part of a strategic look at the industry. I
ran into this from the EOG Resources annual report:

ì On the supply side of the North American natural gas picture, we foresee
a 'perfect storm' brewing: a disturbing, unprecedented convergence of market
forces related directly to the three longstanding bases in the North
American natural gas market grid ó the U.S., Canada and Mexico. From 1994
through 2001, the U.S. recorded flat natural gas production of approximately
52 billion cubic feet per day (Bcfd), while natural gas demand increased to
62 Bcfd. In 2002, we estimate total U.S. natural gas supply decreased 5
percent, the largest drop in 17 years. In 2003, we estimate supply could
fall another 1 to 3 percent to approximately 47.5 Bcfd.
In the past, natural gas from Canada provided a safety valve, flowing as
needed across the border to fill the 10 Bcfd gap. Those days may be gone,
based on steadily dwindling Canadian natural gas reserves and the increase
in inherent decline rates in mature basins. After reaching a peak in 2001,
Canadian production declined in 2002, the first time since 1986.
While Mexico was another source of U.S. supply in the past, it currently
imports 0.6 Bcfd of natural gas from the United States. By 2006, estimates
predict that figure will increase to at least 1 Bcfd. This 'perfect storm'
confluence of events is expected to be a multi-year phenomenon that pushes
natural gas prices substantially higher than historic levels.
Drilling activity in North America has not yet responded to the recent
higher natural gas prices. Substantial new supplies of natural gas are not
expected to hit the U.S. market until 2007 at the earliest, when a Mackenzie
Delta pipeline from Canada is constructed, or relief is provided by
increased liquified natural gas (LNG) infrastructure and imports.
Demand for natural gas, on the other hand, has remained strong. Thus,
from a producer's perspective, the North American natural gas market is the
'sweet spot' of the entire worldwide energy picture. This reinforces EOG's
belief that North America is an excellent place to be positioned for the
foreseeable future.
http://www.eogresources.com/investors/arweb/2002/letter_1.htmlhttp://www.eogresources.com/investors/arweb/2002/letter_2.html
accessed 6-16-03

Gas storage is at record lows. The airconditioning season will require lots
of electricity (generated by burning natural gas) so it will be hard to
re-fill the gas storage prior to winter when the gas demand goes way up for
heating. One analyst told me that there is little fuel switching which can
take place because the price of oil is already high and coal is still an
environmentally bad idea. Only a really cool summer will help.